National Fuel Gas Company (NYSE:NFG) reported a large increase in production in the first quarter of fiscal 2011 and also raised its guidance on production and earnings for the full year. The company also plans large-scale development of the Marcellus Shale in 2011.
IN PICTURES: 5 "New" Rules For Safe Investing
National Fuel Gas Company reported production of 15.7 Bcfe in the first fiscal quarter ending Dec 31, 2010. This was a 35% increase over the same period last year. National Fuel Gas Company conducts its exploration and production activities through Seneca Resources Corporation, a subsidiary of the company.
The biggest increase in production came from the Appalachian Basin, where National Fuel Gas Company has been actively developing the Marcellus Shale. The company increased production here by 5.3 Bcfe in the quarter relative to last year.
National Fuel Gas Company put 14 Marcellus Shale wells into production in the quarter and exited the year producing 90 million cubic feet per day. The company also raised its guidance on production for the full year to a range of 65 to 75 Bcfe, up from the previous range of 60 to 70 Bcfe.
National Fuel Gas Company is focusing much of its capital on the Marcellus Shale in the Appalachia Basin. The company has 745,000 net acres prospective for this formation and plans to put most of its 2011 drilling budget into development here. National Fuel Gas Company is continuing to add to this position and recently purchased acreage in Tioga County, Pennsylvania from EOG Resources (NYSE:EOG).
Diversified Energy Company
National Fuel Gas Company may have one of the largest exploration and production operations that most investors have never heard of, as the company is a diversified energy company with a regulated utility and pipeline business. National Fuel Gas Company distributes natural gas to customers in Western Pennsylvania and New York. The company's pipeline and storage operations are also in this area.
Other companies with this diversified business model include Energen (NYSE:EGN), which has a large exploration and production segment and also owns a regulated natural gas distributor in Alabama. The company has reserves in the San Juan, Permian and Black Warrior Basins. EQT Corporation (NYSE:EQT) has an exploration and production business, as well as a midstream segment that operates more than 11,000 miles of pipeline in the Appalachian Basin.
National Fuel Gas Company is now projecting GAAP earnings for fiscal 2011 will range from $2.75 to $3.00 per share, up from the previous guidance range of $2.40 to $2.70 per share. This guidance is based on fairly reasonable assumptions for unhedged oil and natural gas volumes for the balance of 2011. The company is assuming $4.00 per million BTU's for natural gas and $80.00 per barrel for crude oil.
The Bottom Line
National Fuel Gas Company reported a large year-over-year increase in production in the first quarter of fiscal 2011 and also raised guidance on earnings and production growth for the full fiscal year. The company plans to put much of its 2011 capital budget into developing the Marcellus Shale. (For related reading, take a look at How Does Crude Oil Affect Gas Prices?)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!